Einhorn wins, or does he?

Commentary: Greenlight may need to rethink short positions soon

NEW YORK (MarketWatch) -- David Einhorn has bested Erin Callan and to some extent Dick Fuld, but he shouldn't celebrate too long. Lehman Brothers Holdings Inc. is poised for a rebound.

Assuming Einhorn, the principal behind hedge fund Greenlight Capital, is correct, Lehman
LEH
has a lot of cleaning up to do on its balance sheet. Callan's exit, along with chief operating officer Joseph Gregory's, allows Lehman to get the conspicuous inconsistencies of its finances in order. See full story.

To bring Lehman in line with outside analysis will certainly cost the firm. There will be write-downs and adjustments that make the firm vulnerable to a market panic. Shares fell early Thursday, knocking another billion from Lehman's market value. Lehman still has $65 billion in risky assets on the balance sheet. A third of that could be worthless right now.

But a new CFO and COO also could signal that Lehman is poised for a turnaround. Investors could bid up shares after the shock of the departures wears off. Lehman is trading at close to half of its book value. A rebound would mean trouble for Einhorn who has made no secret of his short positions and campaigned heavily for Lehman shares to fall.

Dick Fuld, Lehman's chief executive, clearly hopes the new appointments will quiet the criticism. Bart McDade and Ian Lowitt are Lehman veterans who won't need much time to get a handle on the business. Lowitt brings something Callan didn't have as CFO: the benefit of the doubt.

As investors sort through the mess, Lehman has to look at a deal with a commercial bank now. That could help send shares higher. See related commentary.

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